The news hasn’t been good for Gov. Jerry Brown’s effort to impose a $50 billion tax increase. Support for Proposition 30 continues to slide — a bad sign this close to election day — and now he has to contend with a flurry of news stories that have focused on California’s hostile business climate.
California may be known for its warm beaches and great weather, but not even the sunshine can keep individuals and businesses from fleeing the Golden State in droves in search of low-tax, business-friendly states. For the governor and his tax hike allies, this makes Proposition 30 an even harder sell. But an honest discussion of business flight is perhaps what voters need to fully understand the damage Proposition 30 will inflict on California’s economic future.
Proposition 30 supporters would like voters to believe that the “businesses will flee” line is an exaggeration, that the weather is just too good to go anywhere else. But a recent study by the Manhattan Institute shows that California has lost millions of residents to other states. This trend has been increasing for two decades. States such as Texas, Arizona and Nevada have been receiving an influx of Californians because tax burdens are low and jobs, in some cases, more plentiful. In addition, a recent survey of CEOs revealed that for the eighth year in a row, California ranks the worst for business.
The unemployment rate in California remains above the national average. Just recently, under the shadow of the Capitol, the Sacramento region was hit with massive private-sector layoffs. Comcast announced it was closing its call center in Natomas, eliminating 1,000 jobs. Days later, Campbell’s Soup announced it was closing its Sacramento plant, laying off 700 workers. Vision Service Plan, an eye care insurance company that employs 2,100 people in Sacramento, is putting 150 jobs on hold until it resolves a dispute with state regulators.
Does Brown have his head in the sand as he pushes for Proposition 30’s huge sales and income tax increases? Consumers will start paying more for their everyday needs as the price of goods goes up. Small business owners face up to a 30 percent increase in taxes under the initiative. If these businesses don’t pack their bags for other states, they will make up for the rising cost of doing business by eliminating jobs or cutting salaries.
And California now has the highest gas prices in the nation, creating even more uncertainty among struggling families and small businesses.
Without jobs, private sector spending plummets. Without private sector spending, tax revenue plummets. This isn’t rocket science, it’s Economics 101.
Furthermore, Brown signed a faulty budget that relied heavily on volatile income tax revenue, which he has publicly admitted is bad policy but good politics. In a bad economy, the state takes in less revenue. Californians can be guaranteed that the money Brown thought he was going to take in will not be enough. Then what? Will he ask us for more?
Now more than ever, Sacramento politicians need to take a hard look at the policies that impact revenue generation. Instead of raising taxes, we need to focus on developing a better business climate that gives entrepreneurs incentive to root their companies in California and creates jobs. It’s time to get Californians back to work and put our economy back on track. Proposition 30 is a step in the wrong direction.
Jon Coupal is president of the Howard Jarvis Taxpayers Association. John Kabateck is executive director of the National Federation of Independent Business/California. They wrote this for this newspaper.